An Analytic Derivation of the Efficient Portfolio Frontier
Year: 1972
Type: article
Abstract: The characteristics of the mean-variance, efficient portfolio frontier have been discussed at length in the literature. However, for more than three assets, the general approach has been to display qualitative results in terms of graphs. In this paper, the efficient portfolio frontiers are derived explicitly, and the characteristics claimed for these frontiers are verified. The most important implication derived from these characteristics, the separation theorem, is stated and proved in the context of a mutual fund theorem. It is shown that under certain conditions, the classic graphical technique for deriving the efficient portfolio frontier is incorrect.
DOI: 10.2307/2329621
Author: Robert C. Merton
Institution: Massachusetts Institute of Technology
Language: English
Field: Decision Sciences
Domain: Social Sciences
Open Access status: green
OpenAlex ID: W2059627964